“As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P’s Global Credit Portal suggesting that France’s credit rating had been changed,” S&P said. “This is not the case: the ratings on Republic of France remain ‘AAA/A-1+’ with a stable outlook, and this incident is not related to any ratings surveillance activity. We are investigating the cause of the error.”

Downgrading France’s credit rating would negatively impact the rating of the European Financial Stability Facility (EFSF), the bailout fund for struggling euro member countries that has funded rescue packages for Greece, Ireland and Portugal. If the EFSF ends up paying higher interest on its bonds, it may not be able to provide as much funding for indebted nations. “It was a mess,” said Lane Newman, the New York-based director of foreign exchange at ING Groep NV. “It calls into question the credibility of people who can have that sort of impact not really being careful.”

“It clearly raises issues about internal systems and controls,” said Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, CA-based bank- rating firm. “The onus is on them to be careful and it’s troubling. Whether you’re a broker dealer or a rating agency, everything you say has to be very carefully considered because of the weight that they carry.”

The incident is currently under investigation. “This is a very serious incident,” said European Union (EU) Internal Market Commissioner Michel Barnier. “This shows that we are in an extremely volatile situation, that markets are extremely tense, and therefore that players on these markets must be extremely rigorous and exercise a duty of responsibility.” Barnier continues, “It is all the more important since these are not minor players on these markets, but actually one of the three major rating agencies and therefore an agency that has a particular responsibility. I do not wish to make a statement on the failure itself, which immediately was recognized by Standard & Poor’s. The European authority for credit rating agencies, together with AMF, the French market authority, will have to look into this and draw conclusions from this incident.”

S&P’s error spooked investors already apprehensive over Europe’s debt crisis, feeding concerns that the continent’s debt problems had engulfed the region’s second-largest economy. It contributed to the worst day for French government bonds since before the euro debuted in 1999.

The Globe and Mail’s David Berman wonders If the error was practice for the real thing. “Standard & Poor’s downgrade of France’s credit rating was apparently accidental – so consider the reaction to the panicky downgrade as a kind of dress rehearsal: It lets you know how markets will react if and when an actual downgrade goes through. The way things are going for Europe’s sovereign-debt crisis, an actual downgrade looks more than likely. Just as Italy supplanted Greece as the eurozone’s biggest trouble spot, highlighted by the country’s surging bond yields, France has the makings of a troubled spot in-the-making.”